The first thing to know is that NFC is actually not new tech. It's an evolution of the radio-frequency identification (RFID) technology, which has been used for years as the basis for the London Underground's Oyster cards, where you simply tap your Oyster card on a pad to pay for your journey.
NFC extends the capabilities of RFID, though it's still compatible with the older technology, and should be able to do more than just take payments. NFC's development is overseen to a degree by the NFC Forum, which publishes specifications and has developed a certification scheme for ensuring that different NFC devices work with one another.
The Forum's members include lots of electronics manufacturers, as well as most major mobile operating systems, including Android, Symbian and RIM (in case you're wondering, Apple isn't on the list, and NFC Forum director Debbie Arnold says the organisation is "keeping an eye out" for the iPhone manufacturer, but declined to comment on whether there had been any contact already).
The Nexus S is NFC-equipped and the iPhone 5 could be, too
Uses for NFC
There are three different use cases for NFC, which Debbie Arnold describes as "sharing", "pairing" and "transactions". Technically, these are known as "reader/writer", "peer-to-peer" and "card emulation" respectively.
For "sharing", connections between NFC devices always work in the same way: one acts as the reader, while the other is the writer. The reader will be powered, and produces a small (typically 4cm at most) radio frequency (RF) field that activates the writer, which then sends it information. The RF field alone is enough to power the NFC capabilities of the writer, which enables it to be placed in something as small or thin as an Oyster card, which has no battery of its own.
Smart Poster is the name given by the NFC Forum to small writer RF tags, which Arnold says can be embedded "almost anywhere, from a magazine to a poster or a statue, or on the wall". You can then tap this with an NFC device, such as a suitably equipped phone, and see whatever information has been included. It could be a short description of what you're looking at, or a film poster could give you the showing times at your local cinema and directions to it, or an advert in a magazine might give you a coupon.
It could have more important uses, too. Arnold gives the example of a prescription bottle with more safety and usage information available using an embedded Smart Poster than you could fit on the label.
With two powered devices, peer-to-peer data transfer similar to Bluetooth is possible. Although it's slower than Bluetooth and has a much more limited range, it consumes less power. There are also no set-up passwords or codes required, as there is with Bluetooth and secure Wi-Fi. You could simply place your digital camera next to your TV to send photos across for viewing.
Because of this, one of the possibilities for NFC use is as a way for devices to 'handshake' as a way of accepting another type of connection. For example, it could actually replace the set-up hassles when pairing two Bluetooth devices. They would need to be placed close enough for the NFC to register first, but could then be moved away to normal Bluetooth distances once the connection was established.
Many wireless routers come with a card with the WEP/WPA code on it for reference, but this could be NFC-equipped, meaning you would only need to tap your new computer/phone/laptop with it to connect securely.
Contactless payment in phones
All of these extended uses for NFC could be very useful, but contactless payment is what's really hitting the headlines.
Barclays already uses debit cards with what it calls 'contactless technology' built in, in conjunction with Visa. It enables people to pay for items less than £15 simply by placing their card on or near a payment pad.
While incorporating NFC in debit cards is one way to ensure wide distribution of the technology, it doesn't make the most of some of the other features it's capable of. When paying with a phone, you could not only pay, but receive plenty of information digitally in return.
Arnold says that users can make a payment, and in the same simple tap receive back "coupons, receipts, loyalty points and warranty programs". It could save customers time, and retailers money and resources.
Those coupons could also be very targeted, since the retailer will know what you buy and how often. This system is already in place with many loyalty card schemes, but the process could be streamlined. Of course, with this kind of focussed data collation, we're getting into the realm of arguably NFC's most high-profile supporter so far…
Google and NFC
Google declined to talk about concrete plans regarding NFC for this article, confirming to TechRadar that its inclusion in the Google Nexus S phone was more a case of future-proofing than part of an immediate strategy.
However, at the Web 2.0 summit in 2010, Google's Eric Schmidt actually demonstrated using NFC as a way to get information on a place by tapping a phone against a special Google-branded location card, negating the need to search manually.
He also talked up the ability of phones to act as a payment system when equipped by NFC. Google told us that this can be considered a guide to where the search giant hopes to see the technology go in the near future.
"We think the overall mobile market, which is already extraordinarily excited about these payment systems, will benefit from having [NFC]," Schmidt explained.
"One way to think about it is that this could replace your credit card," he added.
Mobile phones - and smartphones more recently - have become the ubiquitous accessory of our lives. If payment technology can be built into them, would a wallet with cards even be necessary any more?
Samsung and Visa have teamed up to raise awareness of this possibility with a high-profile distribution of NFC-capable phones to the Olympic and Paralympic athletes at the London 2012 games. The phones are also set to be released to the general public as well, and it's clear that Samsung - as an early innovator of the technology - is hoping to be at the forefront of any wider uptake.
"We regard the greatest show on earth as the perfect opportunity to showcase how this technology can make a positive difference to people's lives," said Seokpil Kim, president and CEO of Samsung Electronics Europe.
NFC security
Of course, the obvious question to ask about payment where you simply pass your phone or card over a receiver regards security.
There have been concerns that NFC would be vulnerable to people wandering around with a reader device, making unwanted transactions for anyone who walks past, or that a stolen card wouldn't even need a matching PIN for the thief to use it.
The first of these scenarios is combated partly by the short-range nature of NFC - you can't simply scan a room as you could with Wi-Fi. You still need to effectively touch against whatever device holds the information.
Barclays details a few methods designed to combat the second concern above, including that £15 transaction limit, which means that a thief couldn't simply empty your account in one go.
"Where you're going to see security, especially from the payment world, is in that payment application itself," says Debbie Arnold. This bears out in Barclays' system, in which the payment machine will ask for a PIN to be entered if your card is used several times in a row. To a degree, NFC could be considered a dumb connection, and the security needs to be integrated into the software that surrounds it.
The usual fraud cover that's offered by other payment systems is also in place, meaning that you won't be liable for any fraudulent transaction provided you've acted with reasonable care.
"The reason this NFC chip is so interesting is because the credit card industry thinks that the loss rate's going to be much [lower]," Eric Schmidt says.
Continuing that thought, Arnold details one particular reason why NFC integrated into phones could actually offer greater security: "Today, if you lose a card you're not liable because of the business rules around it, but somebody can still go around and make transactions either under the [£15] limit or in offline terminals, and the bank has to eat that fraud. Today, if you lose your phone, not only might you have password protection on it, but also the operator can turn it off instantly. So you have double protection if you have a phone with a payment application on it."
Services like Apple's Find My iPhone and HTC's Sense.com can also wipe phones remotely, meaning you could immediately render your phone useless as a payment device yourself when you notice it's missing.
Certainly, it would be a boon for consumers if the technology did prove to be more secure in the long run, as well as convenient. When it comes to introducing a new payment technology, we can't help but think of the resistance to bringing in chip-and-PIN from some quarters, but NFC-based payments look set to be purely optional for the foreseeable future, so may have a smoother introduction.
In any case, with the likes of Google, Samsung, Barclays and Visa behind it, it's likely that NFC will find its way into your pocket before too long, one way or another.
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